India's external debt rose at fastest pace in 7 years in FY25: Report

India’s external debt increased 10.1 per cent in 2024-25 (FY25) to $736.3 billion, marking the fastest expansion in seven years in dollar terms. In rupee terms, the debt stock climbed to ₹63 trillion, reflecting a 13 per cent growth and an addition of ₹7.3 trillion, according to the External Debt Status Report 2024-2025 released by the Union Finance Ministry.  

The dollar-terms growth significantly outpaced the 6.4 per cent uptick recorded in FY24, when external debt had touched $663.8 billion. The FY25 external debt growth was the highest in seven years in rupee terms as well. In FY18, external debt had increased 12.6 per cent in rupee terms and 12.3 per cent in dollar terms.  

The Finance ministry noted that the US dollar-denominated debt continued to be the largest component at 54.2 per cent of India’s total external debt stock as of end-March 2025. While dollar-denominated debt has consistently topped India’s debt stock, with a share of over 50 per cent, the share of such debt in FY25 was the second highest in eight years, just shy of 54.6 per cent recorded in FY23.  “Indian Rupee external debt occupied second place after US Dollar external debt at end-March 2025, with the share of 31.1 per cent in total external debt, followed by yen (6.2 per cent), SDR (4.6 per cent) and euro (3.2 per cent),” the report said, adding that India’s external debt position is comfortable. 

Finance Minister Nirmala Sitharaman, in the foreword to the report, said that “India’s external debt remains sustainable and prudently managed” and relevant debt indicators are “in the comfort zone”. “Indian rupee-denominated debt, constituting 31.1 per cent of total external debt, also provides an element of comfort from a currency risk standpoint. The stability of the total external debt is further enhanced by the fact that the long term constitutes a significant proportion of the debt, and the short term debt is essentially incurred to finance imports,” she emphasised.  

The external debt-to-GDP ratio inched up 60 basis points to 19.1 per cent in FY25 from 18.5 per cent in the previous year. India’s foreign exchange reserves stood at $668.3 billion at end-March 2025, providing cover for 90.8 per cent of the country’s external debt, down from 96.7 per cent a year earlier. The report also noted that the ratio of short-term external debt to reserves inched up to 20.1 per cent from 19.7 per cent in FY24, reflecting a marginal rise in near-term obligations. 

“The total external debt of the world stood at $104.7 trillion as of December 2024, and comparative data for India was $718.5 billion, placing India at the 22nd position globally... India’s external debt stock is low from a cross-country perspective,” Sitharaman said. underlined.

 

“From a cross-country perspective, India’s external debt is modest. In terms of various debt vulnerability indicators, India’s sustainability is better than that of the Low and Middle-Income Countries (LMICs) as a group and vis-à-vis many of them individually”, the report noted. 

 

A stronger US dollar contributed valuation gains of $5.3 billion. Excluding this effect, the rise in debt over the year would have been $72.9 billion instead of $67.5 billion as of March 2025, the report noted.